VIC - Selling 100% stake in SDI (which effectively owns 41.5% interest in VRE)

According to VIC's filing and briefing session on March 18, VIC plans to sell up to a 100% stake in SDI Trading Development and Investment Company Limited, which holds a 99% stake in Sado Trading Commercial JSC, who owns 41.5% of VRE's outstanding shares. After this transaction, VIC will still hold 18.8% of VRE.

• Valuation: Valuation for transferring the 100% stake of SDI is VND39.08tn (USD1.6bn). The purchase price is comprised of SDI’s effective interest in VRE at approximately VND32,000/share, and SDI’s rights to minority economic benefits in VIC/VHM’s real estate projects Vu Yen and Green Ha Long.

• Timeline: The sale is expected to be executed from March 2024 to Q3 2024. VIC will complete divesting a 55% stake in SDI in March and the remaining 45% stake in the next six months. The cash collection will follow the expected sales executed from March 2024 to Q3 2024.

• VIC is expected to recognize profit before tax of VND21.52tn (USD875mn) from this divestment. This is a cash transaction and will be recorded in VIC's balance sheet upon receipt.

• Buyers: Several local investors who are knowledgeable about the consumer retail market and/or savvy in real estate investment in Vietnam.

• Divestment purposes: 1) optimization of funding allocation of VIC, from more mature businesses to high growth potential businesses and 2) supplement capital for the Group's operations, including debt repayment.

Impact on VRE's mall development/operation:

• For existing operational malls: VIC will sign a management contract with VRE, under which, VIC will manage the operations of existing malls on behalf of VRE, ensuring the rights of tenants as committed in the signed contracts.

• For the mall pipeline projects: For pipeline projects where the construction has already been initiated, there will be no changes to the terms and conditions of the agreements. For other pipeline projects, the relevant parties will discuss to arrive at appropriate terms.

Our view: The expected cash proceeds from this divestment could support VIC to address its funding demands in 2024. We also expect that the operation of VRE’s existing malls and 2024-25F mall launching plans (i.e., started construction) will remain intact. Meanwhile, we need more time to assess the impact on VRE's longer-term mall pipeline development after VIC's divestment.